Stick to ultra short-term and dynamic bond funds: Bekxy Kuriakose, Principal Mutual Fund

The Reserve Bank of India is not likely to cut rates in its bi-monthly monetary policy review meet tomorrow, say money market participants. The banking regulator had cut the policy rates by 25 basis points (bps) in its last policy review in August. The RBI has cut policy rates only once after it changed its stance from accommodative to neutral in February.

“We expect RBI to continue to maintain the neutral stance. We expect no change in key rates. RBI may highlight concerns on growth front,” says Bekxy Kuriakose, Head- Fixed Income, Principal PNB Asset Management. “We feel post-policy, gilt yields may move in a range of 5 bps, depending on the market positioning. If there is a negative or positive surprise, there could be sharper moves,” adds Kuriakose.

Though some experts believe that there could be a rate cut of 25 bps this financial year, most money market participants are ruling out a rate cut immediately. “We expect RBI to maintain a pause on rate cuts going forward,” says Kuriakose. “For debt investors, we advocate a balanced/diversified strategy of investing in ultra short-term, short-term and dynamic funds,” she adds.


However, many mutual fund advisors caution investors against making changes to their investment strategy based solely on interest rate movements or predictions. They would like investors to choose their debt mutual funds (or any investments, for that matter) based on their goals, investment horizon and risk profile.

“Investors may not be able to anticipate when market starts factoring in rate cuts or hikes and it need not be post policy necessarily. Hence, a balanced investment strategy and remaining invested for longer periods with periodic review is desirable rather than trying to time the market,” says Kuriakose.